Mark Matthews Weighs in on Tax Enforcement Announcements in Tax Notes

Congress’s penny-wise and pound-foolish defunding of the IRS may have pushed the agency to overuse a key tax compliance tool — the deterrence effect of enforcement announcements, according to tax lawyers.

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Mark E. Matthews of Caplin & Drysdale was the IRS Criminal Investigation division chief who revamped some criminal tax enforcement publicity efforts. He pointed to nontax law enforcement, especially at the FBI, and noted that all law enforcement agencies publicize indictments. Tax enforcement is an area more dependent on deterrence than efforts to address things such as drug crimes and financial fraud, he said.

Publicity isn’t just for deterring taxpayers but also informing them of where the IRS thinks the lines are drawn, Matthews said.

It’s understandable that the defense bar wants as little publicity of a case as possible, and reasonable minds can differ on what stage of a case is appropriate for a release, according to Matthews.

It's Congress's Fault 

The IRS has been losing resources for over a decade and needs to look for ways to find more deterrence, Matthews said. And that resource crunch is the real problem, Agostino and Matthews agreed.

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“If Congress would more appropriately fund the IRS’s enforcement activities, both civilly and criminally, it would certainly reduce the temptation to be overly aggressive in any particular case or in the publicity of any particular case,” Matthews said. An IRS with adequate resources should reduce the public’s concern that the agency is too aggressive, he said.

With proper funding, the IRS will have better agents, with better training, who will be able to select better cases for examination and investigation, Matthews said. In other words, Congress should follow through on President Biden’s call for more IRS funding, he said.

Once the IRS has sufficient resources, it can devote more time to crafting its publicity and carefully choose which adjectives and facts to use, according to Matthews.

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